Does a car insurance quote affect your credit score?

When you use a comparison website for car insurance quotes, car insurance providers will be able to look at your credit score. If you choose to pay for your insurance monthly rather than annually, they’ll also perform a credit check before you've bought your policy.

However, checking a car insurance quote shouldn’t affect your credit score as the insurance providers should be performing a ‘soft search’ rather than a ‘hard search’.

A soft search gets recorded on your file but won’t affect your credit score. These types of searches are only visible to you and not the lender. Eligibility checkers are usually the type of thing to use a soft search on your credit file.   

Hard searches are the type of search that leaves a mark for lenders to see. A hard search could harm your credit score, which means it could affect future credit applications. If you apply for a lot of credit in a short space of time and they all leave hard searches, it could give lenders the impression you’re hungry for credit. However, a company should ask for your permission before performing a hard search.

Why will my credit history be checked?

Car insurance prices depend on your personal circumstances. That’s why you're asked to input information such as your name, address, employment status, marital status and past claims history when searching for a quote.

For example, if you live in an area with a high crime rate, you might pay more than someone who lives somewhere with a low crime rate. Or if you've made a claim on your insurance in the past, you'll likely pay more than someone who hasn't claimed before.

The insurer will perform a soft check based on this information to check all the details you've provided are correct. A soft check would only be visible to you and the credit reference agency providing your credit score.

Will taking out an insurance policy leave a mark on my credit history?

Taking out an insurance policy does have the potential to leave a mark on your credit history. However, it depends on how you choose to pay for your insurance.

If you pay your annual fee upfront, there’s no credit agreement in place, which means there’s no reason for it to get logged on your credit file.

However, if you decide to pay monthly, you’d be entering into a credit agreement whereby you’d be getting something up front (in this case, your car insurance) and paying it off over a set amount of time. Therefore, in this instance, your insurance policy would get logged on your credit file.

If you’re worried about your insurance policy affecting your credit score and you can afford to pay for it upfront, that’s probably the best option. However, if you make your monthly payments on time, it shouldn’t cause you any problems when getting future credit.

Can car insurance improve my credit score?

Unfortunately, your car insurance and paying your premiums on time won't improve your credit score.

You could consider paying your car insurance premiums using a credit card and then paying off your credit card bill regularly to improve your credit score. Bear in mind that by doing this it could potentially increase your credit utilisation rate, so you should consider this before you use your card. However, just paying off your car insurance won’t necessarily improve your score.

Best practice tips for staying on top of your credit rating

Here are some top tips to help you keep on top of your credit rating:

• check your credit score for free and get a copy of your report using Experian, TransUnion or Equifax. You can get your Equifax report for free using our member-only platform, CredAbility.
• check your credit report regularly to make sure all your information is up to date and correct
• make all your repayments on time every month
• consider setting up a direct debit to make sure you never miss a payment
• never borrow more than you can afford to pay back
• try using a credit-boosting service.